M&A deal counts are falling amid uncertain global economic conditions. M&A transaction values declined after 2021, while the ratio of enterprise value to EBITDA has remained relatively stable, Senior Partner Jake Henry and colleagues explain. Customer sentiment has shown mixed trends postpandemic, and IPO activity experienced a sharp decline since 2021, given shocks to capital markets.
Image description:
A bar chart and 5 line graphs depict key M&A metrics from 2000 to 2024. The bar chart shows M&A transaction value in trillions of dollars. The data fluctuates, with peaks observed around 2007, 2015, and 2021. The line graphs are superimposed over an afterimage of the bar chart to show comparables and discrepancies. The first line graph illustrates the ratio of enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization). This ratio generally stays between 15× and 20×, with some peaks exceeding 20× and troughs dipping below 15×, generally following the peaks and valleys of the M&A transaction value. The second line graph tracks the Federal funds rate percentage, which shows significant variation over the period, reaching above 6% around 2000 and then dropping to near 0% in 2012 before rising to approximately 5% by 2024. The third line graph is customer sentiment (indexed to 100 in 1996). It shows fluctuations, mostly between 60 and 100, but notably reaching above 100 in 2000 and experiencing a dip below 60 in 2008. It rose to near 100 around 2018 before declining in 2021 and then climbing again. The final two line graphs are IPO related: net proceeds and number of IPOs. Each shows a significant peak—in line with M&A transaction-value spike—around 2021 and relatively lower numbers throughout the rest of the period.
Note: This image description was completed with the assistance of Writer, a gen AI tool.
Source: Dealogic; Federal Reserve Bank of St. Louis; S&P Capital IQ; McKinsey analysis.
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To read the article, see “Uncertainty in M&A: Postcards from the new normal,” February 19, 2025.